Transcription
Hello everyone, it's Atriid, your financial analyst present on the crypto market for 7 years and holder of the financial investment advisor certification in France. I make videos every week to explain to you what is really happening behind the scenes, what is happening at the macroeconomic, onchain, and technical levels to be able to predict whether we will have upward or downward extension movements with the most probable scenarios that will occur. Today, a small Bitcoin point and especially a point regarding the Japan carry trade because we find this narrative returning to the forefront because there is a bit of fear in the markets at the moment and a point that already makes me laugh is that I really have the impression that people have a goldfish memory. We lived this same narrative last year. Last year, we also had the threat from Iran that the D3 d'ormous would close and everyone reacted as if it were the first time it happened, when in fact it happens so recurrently that I wonder how people can forget it. What is even more shocking is that it is the same actors at the head of these problems. It is the same geopolitical conditions, the same macroeconomic conditions, and the same results that are occurring. Because necessarily, if causes have always led to the same effects, the probabilities that they will lead to these same effects are more or less high. And that's precisely what we play on the markets. What we do on the markets is nothing more than a bet. We take a bet by buying here that it will go higher and that we will sell. We take a bet here by selling that we will buy back lower and make a profit. That's all there is to it. And so, as in every bet, we will look at the probabilities, and that's what differentiates it from pure gambling. Are we at 70%, 80%, 90% chance of an event happening? If so, we bet on it. And that's where I notice a real gap on YouTube, a real gap on social networks that is being created between channels that maintain a real line of conduct, meaning channels that, like ours, have been saying for weeks, for months, we are bullish, we are not in a bear market because there are these and these elements. And many other channels that are changing their tune. If there is a downward movement, it calls for downward movements, notably Bitcoin at 50,000 dollars this week. Well, we have to admit that we are not there. Others who say, and I was stunned by this, that liquidity principles, liquidity is useless in the crypto market, that it's smoke and mirrors and that liquidity leads to nothing, that there is no correlation. I mean, I am truly shocked by what I see. So if I can give you just one piece of advice, it's not necessarily to say Millennium Crypto is better than others and so on. No, but there are quite a few channels that follow a real line of conduct, that take the risk of being wrong, certainly, but at some point, you have to put your balls on the table and follow these channels instead of others that make four videos a day and are bearish in the morning and bullish in the evening, and you finish the videos even more lost than at the beginning. You must absolutely maintain a course, be accompanied, be advised, and really look at what is happening behind the scenes. So on the crypto market, Bitcoin seems to have found a bottom. In any case, we have a rather nice structure in which we had dipped just here. We turned around, we put in a second structure here that we are breaking. We closed above it last night, magnificent. And so what we are waiting for now is a bullish retracement. I told you, I will always show you in hindsight what I post to the community. And what I had posted directly here on November 22nd as a message was precisely that the price at which we were had a high chance of making a bottom zone, that we wanted to see some signals, which we saw but I couldn't tell you which ones, and that this zone had a high probability of forming a bottom. November 22nd, there's no cheating, it was just here, we were at 84800 and that's where we had this first rebound where we had things that happened just here that led us to say that it would be a rebound zone to go here, here, here higher. That's future music. In a message on November 30th, I had also stated to the community that what absolutely needed to be done at the beginning of this week was to make a movement at the beginning of the week that would take all the liquidity to go more or less into these price zones and then have a rebound here. And that's what happened. So for now, we like to see that. What is happening now is that there are many videos on YouTube where they tell you 96,000 dollars will be the maximum, we will go down lower. 103,000 dollars will be the maximum, we will go lower. 109,000 will be the maximum and then we will go back up. At the moment, none of these scenarios is the one with the highest probability of unfolding. I say it, we have data that shows that these scenarios are not the ones that will unfold. In any case, they are not the ones with the highest chance of happening. They are certainly on the table, but again, remember the notion of betting. We bet based on probabilities. And the scenario with the highest probability is not this one. And if you are interested, please click on the link in the description. You will arrive on the site millennium-crypto.fr. You take a subscription, you join us on Discord, and we really do everything for you. The macro, the onchain, the technical, we have topical channels precisely for this. We do lives every Thursday at 6 PM. Once or twice a week, I am live on an audio channel. You can all come for 1 hour, 1.5 hours. We stay very far from this YouTube passivity where I make videos, I make reports, you watch them, and that's it. There is no interaction. in this Bitcoin. Naturally, I stop here because I directly told the community where we needed to go next. So as you know, I will show you exactly what was said in hindsight because naturally this is information reserved for members. Without transition, we will directly look at what is happening in Japan. And what is happening in Japan is this new carry trade narrative that is emerging and starting again. This is happening as one of the heads of the Japanese central bank said they would raise rates at the next meeting or at least that there were chances they would do so. And this immediately caused great fear in the markets, which is linked to what is called the Japan carry Trade. So here, we are on the yen versus dollar chart, and what you can see is that the yen against the dollar has been falling since around 2012. And this is necessary due to the economic relationship between Japan and the United States. And it is also necessary due to Japan's economic structure, which is, you will see, quite original. The Japan carry trade, in fact, is extremely simple. Japan has extremely low interest rates. If we look at the interest rate here, you can see that they are at 0.5% and they have been very low since 1997. They have not exceeded these levels for nearly 30 years, and most of the time they have been at 0%. What this means is that many investors, many borrowers can go to Japanese banks and borrow money at zero interest. And the carry trade, in fact, what is it? It's a way to make money for free. Let me explain. Imagine you are a large financial firm, you want to borrow 10 billion dollars. You have the solid backing to borrow 10 billion from a Japanese bank. You will borrow 10 billion at zero interest, for example, if we are here. And you will say, "Well, I don't necessarily want to take a big risk with these 10 billion. I already have to repay zero interest, so as long as I earn a little interest elsewhere, I'm fine with that." And you will, for example, go for US Treasury bills with maturities of 1 month, 3 months, 1 year, 3 years, 10 years, which offer respectively 3.7%, 8.370%, 3.5% interest per year. And in fact, since these bonds have almost zero risk, you are sure to be able to pocket the difference between this rate and the borrowing rate you have. And so if you take a 3-year rate at 3.5% and you have to repay 0% per year to the Japanese bank, you pocket the delta 3.5 - 0 = 3.5. That's the carry trade, it's so-called free money. Now, this presupposes two situations. One, the situation in Japan remains the same, extremely low rates. And two, where you are going to invest, particularly in the US market, the value of the currency and therefore the yields on Treasury bonds will not decrease because, necessarily, if here it decreases while in Japan it doesn't move, the delta you will have will become increasingly smaller. Conversely, and this is the worst situation, if ever in the US the currency depreciates, and bonds depreciate, while in Japan the currency appreciates, then you have a double factor. Not only does it go up here, but if it goes down and your delta will shrink, potentially, it has never happened but it can happen, to reach zero. And where there is a big problem is that these large institutions that borrow a lot of money do not buy on spot and do not invest on spot. You are starting to know them, they want to stuff themselves, make as much money as possible. So what do they do? They put a lot of leverage, they can even go into the options market. So there is quite a bit of leverage. And so there are margin calls. There are margin calls, and so if Japan raises its rates a little too high, then there are many people who can panic and will indeed liquidate what they have in progress or rebalance their money elsewhere. And that's where there are two predictions. Prediction number 1, which is still more probable than the second, is that these people who benefit from the carry trade simply panic and withdraw their money wherever it is. Whether it's in bonds or risky assets. out of fear that there will be margin calls, that the situation will become uncertain, and therefore liquidity will be withdrawn from the market. Second scenario, which is also possible because it has already happened, is that these people say, "Okay, we have the US devaluing their currency, so we know that's a risk-on environment, stock market going up, crypto going up, and so on and so forth. And so rather than returning this money, I know I have time ahead of me to go for risk-on assets and so I will go for an asset class that will offer me a higher yield. Stocks, stocks that are a bit riskier, particularly those in the Russell 2000 for example, or even crypto to speculate again and earn that delta which will necessarily be a bit larger. These are two principles that can vary. Now, Japan has a problem, and this is a problem that will allow us to price that we will not necessarily have interest rate hikes as the head of the Japanese central bank said. And this problem is already linked to Japan itself. Right here you have Japan's GDP which has been falling since 2012 on a monthly timeframe. It has been falling, falling, falling. It has been falling in an economic structure where Japan, like China, is an exporting country. Japan exports a lot. You can see here the export chart which is really growing over time, and their number 1 sector is the automotive sector. And we are currently in a situation where GDP is falling, debt is exploding, we will see that shortly, and productivity is also falling. We can see productivity over time, even with Covid it has not exceeded historical levels. We are on a downward trend. In terms of automotive production, which is one of Japan's leading economic sectors, we are also seeing a sharp decline. So we see that we are rather in a phase of economic expansion slowdown rather than an acceleration phase as we experienced here in 2021, we were at lows, we went back up, now we are in a really downward phase. So it's not really the time to come with a rather hawkish policy, a policy of reducing liquidity in the system. That's a first point. It is in this context that Japan has validated a stimulus plan of several tens of billions for the economy. And so here, we have two pieces of information that confront each other. On the one hand, saying "Okay, we are going to tighten monetary policy, so we might raise interest rates" and on the other hand, implementing a package of almost, I believe, 70 billion which has already been validated by the Japanese government and which should normally boost the economy. So there is a slight paradox between their words and their actions, but above all there is this notion of exports that must be taken into account because, necessarily, the notion of exports means that they must have a very competitive currency. You know, China is the same. They must have a fairly weak currency to be more competitive and export much more. And it is in this sense that the dollar against the yen pair makes complete sense. Why? Because, as you know, 50% of global trade is done in dollars, and therefore it is necessary to prevent the yen from appreciating too strongly against the US dollar. Japan also has a dependence on the United States, which is its main trading partner. And so I am not so much a conspiracy theorist, but I think you can be sure that in a context where the Fed has no choice and must lower rates, we have already seen that, then I think the two countries will call each other before the Bank of Japan makes a decision. Yes, separation of powers, you will tell me no, they are independent, they will not call each other and so on, but stop being naive. Of course they do. The world is nothing more than a big agreement between several parties, and they are no exception. The second big problem concerning Japan, which forces them to keep a rather weak currency and therefore not raise rates, is public debt relative to GDP. You see it here, we have public debt which was 258% of GDP in 2020, which has certainly fallen over time to reach 236% of GDP in 2024. So you have your GDP, you increase it by 136.7% and you have the amount of debt in addition. So it's colossal. It's colossal. And on the other hand, you will tell me, yes, it's colossal, but look, even if it increased from 2019 to 2020, we see that since 2020, debt has been falling. Debt is certainly falling, but it's not falling because GDP is growing, expenses are decreasing, and there is more money because we see GDP falling over time. Debt is falling because the currency is depreciating, and as the currency depreciates, the debt is also diluted. This is a mechanism we have already seen on the channel and explained in a video. And so you have a scenario in which Japan cannot afford to have too high a currency. This would mean fewer exports, and debt that will also mechanically increase further because, necessarily, if GDP falls even more due to fewer exports and expenses remain the same, then you will find debt that will grow. And so Japan is a bit in trouble. They are a bit in trouble and they don't have much choice at the moment but to keep a low currency. And it is precisely, if you ask the question, what led Japan not to raise its rates here in terms of Carry Trade in 2006, it is also what caused the carry trade to resolve itself last year because the Bank of Japan, after having a somewhat hawkish tone, came and said, "No, no, we won't do it after all, don't worry because they mechanically cannot do it." So, will there be one interest rate hike? Why not? But to have a context in which we return here and start to have very high rates, that is clear and net. That will not happen. Now, the other concern regarding Japan is this famous stimulus, this package of several tens of billions of dollars. And what worries the US is precisely the fact that Japan could sell a portion of its US debt to finance its domestic stimulus plans. And that's really what scares them at the moment and what can have real repercussions at the US level. You can see here, you have the chart of the total number of Treasury bonds that Japan holds. And there are 1.1 trillion dollars worth. 1.1 trillion dollars, that makes Japan the first country holding US debt. You can see it ahead of the United Kingdom, ahead of China, ahead of Canada. 1.1 trillion dollars is enormous. What is even more enormous is that Japan's total reserves are currently 1.23 trillion. So the vast majority of Japan's reserves are actually made up of US Treasuries. And so if Japan wants to sell reserves to raise money, to finance things, for example, domestically, then it will necessarily have to sell Treasury bonds. And this caused a small panic at the time, just here between March 2024 and December. Why? Because we saw that Japan was clearly reducing its exposure to US Treasury bonds. We see that since then they have been buying quite a bit. But this is a fear of the US market, to say, very well, but if tomorrow Japan sells US bonds, whereas until now it has participated in refinancing the US debt, what will happen? Will they potentially sell a lot like here between 2014 and 2018? That was not a big risk because China had largely bought US debt. What will happen? And that's what creates uncertainty. I would even go further than uncertainty if Japan were to do it. But I strongly doubt it given the history between Japan and America, which goes far beyond economic and military ties, because the US has a lot of American bases in Japan to ensure stability in the Asia-Pacific region. So it goes much further than the simple economic factor. There is also a military and security impact for Japan. So I doubt they would do it. And if Japan were to say, very well, what matters now is us and no one else, then we could have a narrative in which Japan starts to clearly sell US Treasuries, and this could lead to a "Covid bis" scenario, it could become an extreme, very rapid market panic, but that would be a huge stimulus because, as you know, if you watch the news and you look a little at what is happening geopolitically at the moment, no one is too keen on US debt. And so ask yourself the question, in case of a sale, who will have to buy back US Treasury Bonds? And that's where we could again have the monetary printing narrative starting to apply because, again, recall your memory. What did Powell say very recently? We are stopping QT, but however, the 35 billion dollars per month expiring in MBS, we are going to convert them into TBills, which are Treasuries. So they are already starting to buy Treasuries. And if those who currently hold the majority of these Treasuries start selling, who will buy them? It will be the Fed, it will be the US government that will buy back its own Treasury bonds. And then there will be no choice. Who says buying back Treasury bonds, as there already is now, or rather accelerating these buybacks, says a period of intensive QE. So the worst-case scenario would be this. We have a panic somewhat like Covid bis that lasts 2-3 months, which resets absolutely all markets out of fear. The Fed comes in with a very hawkish tone like in Covid, saying monetary printing to death, and then, of course, monetary printing to death means a new bull run starts, or at least a continuation of the one we are in. Now, that's the worst-case scenario. The best scenario is that, naturally, Japan does as it has always done until now. It's okay, we had a hawkish tone, but in the end, we can't do it, and we lower rates again, or we keep them at 0.5%. Our number 1 trading partner, the United States, needs us, we won't do it. And after a little market fear, we restart, and it's back for another round. So that's what there was to say about Japan. It is in this context. You have to be extremely careful, and as I tell you, macro is what matters most because it's what will allow you to predict whether we will have liquidity or a drainage of liquidity. And you know, if you look at the stats and you rely on mathematical statistics, liquidity is at the moment and has been for decades the number 1 condition that decides whether our risk markets are rising or falling. So look at all this, take the time to do it. It will certainly take you several hours a week, even per day, but you really have to do it to follow all this and see what will happen. And if you don't want to do it because you don't have the time or the desire, then you know what you have to do. You come to millennium-crypto.fr, you take a subscription, you join us on Discord, and we will do all this work for you with great pleasure to guide you as best as possible in the financial markets. It's 11 AM Friday. Have a good end of the day.